US dollar’s rally is likely to continue. And it’s bad for crypto

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The US dollars ongoing strength could put more downward pressure on crypto prices which have already suffered along with other risk assets, as bitcoin lost more than half of its value year-to-date.

For the past few months, the dollar DXY, -0.09% has been rallying to historic levels against its major rivals.

The British pound GBPUSD, -0.39% on Friday crashed to its lowest level against the US dollar since 1985, trading at as low as $1.14. In July, the Euro EURUSD, +0.17% fell below parity against the dollar for the first time in almost 20 years, before bouncing back to parity. Earlier this month, the Japanese Yen USDJPY, -0.39% tumbled to the lowest level against the US dollar since 1998, while the greenback rose above 7 yuan CNYUSD, +0.15% to the dollar for the first time in more than two years.

The dollar has benefitted from the Federal Reserve raising interest rates at a pace faster than other major countries, analysts said.

That gives international investors a lot of confidence that the US is going to be the place to be because theyre not going to allow inflation to get out of control, said Mike Vogelzang, chief investment officer at Captrust.

Meanwhile, the US is probably not going to have a recession thats as deep as say the one in Germany or England or the UK, Vogelzang noted.

The dollars outperformance is detrimental to cryptocurrencies, with the majority of bitcoin trades happening against USD, or USD-backed stablecoins USDTUSD, +0.01% USDCUSD, . The largest cryptocurrency BTCUSD, +0.08% is down 17.6% over the past week and down more than 57% year-to-date, according to data from CoinDesk.

Whats worse for the crypto, the dollars rally is likely to continue, noted Martha Reyes, head of research at crypto exchange Bequant. The only way the dollar can go is still up, Reyes said, citing the energy crisis in Europe, the negative-rate policy in Japan and Chinas zero Covid policy.

Read: Why an epic US dollar rally could be a wrecking ball for financial markets

That said, it appears that the dollar strength is getting stretched, according to Todd Morgan, chairman and partner at Bel Air Investment Advisors.

I think the surprise with the dollar will be coming and next year it will start dropping once again to a more normalized level, Morgan said in an interview. But its also pretty hard to call it a dollar movement as it is interest rates.

Hear from Mike Novogratz at theBest New Ideas in Money Festivalon Sept. 21 and Sept. 22 in New York. The Galaxy Digital CEO has ideas about navigating the crypto winter.

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